Compelling evidence of the non- importance of minimum wages to inflation is provided by the experience of the last year: the national minimum wage was boosted by 8.65%, the most since 1982, yet consumer price inflation over the following fiscal year slowed by over 3 full percentage points. [...] There is still damage to be repaired from the erosion of real Award wages in the first years of 7 An alternative method for measuring changes in real Award wages would be to compare the growth of average wages for all workers covered by Modern Awards against consumer prices (thus taking into account changes in the composition of Award-covered employment and varying hours of work, in addition to ch. [...] 7 Minimum Wages and Inflation We have previously highlighted the lack of correlation between changes in minimum wages and changes in the inflation rate.13 The experience during the turbulent economic times since the Covid-19 pandemic reaffirms the view that minimum wages are not a significant determinant of inflation. [...] In separate research on the impact of minimum wages on prices,21 the OECD concluded: “The contribution of minimum wages to aggregate wage growth appears quite limited and given the relatively low share of minimum wage workers, even sizeable increases in the minimum wage have a limited impact on inflation.” Other international research has also shown that even major increases in minimum wages have. [...] Table 3 summarises our analysis of the insignificance of the minimum wage decision to overall macroeconomic aggregates in Australia.23 Thanks to the Awards system, a larger share of Australian workers is covered by the FWC’s wage award than is the case for minimum wage workers in other countries.
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- Pages
- 19
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- Australia
